Confidence Continues in Capital Markets
In last January’s Capital Comment I observed how exciting it was to see and hear the confidence people have about the New Zealand economy this year.
In last January’s Capital Comment I observed how exciting it was to see and hear the confidence people have about the New Zealand economy this year.
Well from what we’ve seen with our clients and the projects we have in progress, this confidence is now showing through and investors are becoming more active. Our experience is supported by other evidence in the debt and capital markets.
For example, I was delighted to read the April NZVIF Young Company Finance Report that “Angel” investors here placed $53.2 million into young New Zealand companies in 2013 – a record high and an 80% increase on the $29.9 million invested in 2012. Just under $300 million has now been invested into young companies by angels since the Young Company Finance Index began measuring activity in 2006.
One of New Zealand’s oldest business incubators - The Icehouse - is restructuring its approach to funding start-ups. It has set up an investment committee with an international advisory board and will concentrate the number of companies it works with to a maximum of 25. It intends to establish a new seed fund next year of $2.5 - $3 million. The Icehouse is owned by a not-for-profit trust, with 65% of its funding coming from start-up and SME customers, 10% from corporate partners and the remaining 25% from government.
In the meantime the government funded Callaghan Innovation wants to fund a technology focused incubator to encourage start-ups that commercialise intellectual property from research institutes and universities. It will continue to fund the founder incubator model The Icehouse pioneered in 2001, which focuses on supporting the entrepreneur behind the company.
More good news is the recognition by government that new more flexible rules need to be introduced to make it easier – and less regulatory expensive - for business to raise capital. We now have the new Financial Markets Conduct Act 2013 which came into effect on 1 April this year. The Act also introduces equity Crowd Funding regulations and TBK Capital has entered into a relationship with one of the first new companies to apply for the license to operate in this space. Their license is expected to be effective in the next few weeks.
In March the NZX released a Consultation Memorandum relating to the launch of a new growth market for small to mid-sized businesses. Their rationale is driven by the current market mechanisms “not effectively connecting the sources and users of capital in this area.” This New Market “is designed to be a simple, targeted, well-informed, low cost and effective way for businesses to access necessary capital, and for investors to gain exposure to growing NZ companies.” It is aimed at the mid to upper end of the SME market with businesses with an expected market capitalisation $10 - $100 million and a minimum capital raise of $5 million for those seeking additional capital.
A recent article on the changes taking place in our financial markets reports "It has been a bumper year for the New Zealand stock exchange, with the NZX 50 index up more than 11%on the same time last year and trading volumes up by close to 40%". It traces the changes brought about Capital Markets Development Taskforce in 2008 through to the new regulations introduced this year and is well worth reading.
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Interest in investing in New Zealand businesses is at a new high, as is shown by our friends in Wholesale Investor - an Australian based publishing house that we work with to provide media promotion and events for businesses raising capital through us. They held their inaugural Showcase Luncheon in Auckland earlier this month. TBK Capital was one of their Principal Support Partners of this event.
TBK Capital works with numerous intermediaries including the New Zealand Venture Investment Fund (NZVIF), The Icehouse, Callaghan Innovation, Sparkbox and the Ice Angels (who also had the “best ever year in 2013”) in raising money for businesses.
Our specialty is arranging a suitable mixture of debt and equity funding to provide working capital for growth. This will ultimately assist businesses to reach the level where they can attract an exit strategy such as a trade sale or “liquid” equity via the NZX or other listed exchanges.
To see how we can help you, see our last newsletters on this subject: Choosing the Best Loan and Lender and Money for Business.
Current Projects
So it seems an appropriate time to feature some of the projects we are currently promoting or about to release. For further information simply reply to this email listing the offers that interest you, or call me on 09 307 3257 or 021 902 901.
Dodopuzzle - New Eco-friendly Toy/Puzzle
This is one of the most exciting projects with international appeal we've seen. Already in production here in New Zealand this is puzzle that becomes a toy and a work of art. The originators presented at the 2014 Nuremberg International Toy Fair in Germany and are now in discussion with companies from the fair regarding international distribution and manufacturing. The toys produced by dodopuzzle are unique. It is a 3D eco-friendly toy/puzzle made of cardboard, and when completed, looks like art. The product is currently being supplied in New Zealand at museums, zoos and toy stores, and is also available online. It is patented and undergoing patent pending in all relevant territories worldwide. The owners are already in discussion with companies in U.S. and Asia that want to manufacture dodopuzzle under license. Dodopuzzle is raising capital by the issue of new ordinary shares to expand to large scale production in New Zealand to supply the premium markets of New Zealand, Australia and Japan. An IM will be available soon so let me know if you’d like a copy.
5th Element – Revolutionary Bionic Hand
This is a start up business which has developed a robotic (“bionic”) hand that will better enable amputees to resume their lives with confidence, dignity, and in comfort. The 5EL Hand has been specifically designed to meet the challenges faced by amputees and to overcome the shortcomings of currently available devices and effectively empower amputees to "get back on the horse". It's not another me-too device. It is superior to all other prosthetic devices with regard to reliability and dexterity. The company is raising $450,000 by the issue of new ordinary shares to produce and test prototypes, and undertake user and testing trials here and in the U.S. Investment in this Series A round is available now and participants will have pre-emptive rights to partake in the next capital raising round. The IM is available now on signing an NDA. Reply to this email or call me if you’d like a copy.
Engender Technologies
This company grew out of collaboration between Pacific Channel and some physicists at the University of Auckland. See Herald article. On the back of a successful seed funding round in 2011, Engender's scientists have developed key steps to separate male and female bearing sperm cells for the purpose of sex-selective animal breeding in the dairy industry. There is only an inadequate technology in the market and the potential economic value of Engender’s development is huge, as gender is the single most important factor in the value of a calf. Engender has approximately $600,000 of equity left to raise on its way to a target of $1,250,000. Participating investors so far include the New Zealand Venture Investment Fund, leading dairy industry figures (including large scale dairy farmers) and the Chief Operating Officer of a multi-billion dollar ASX-listed technology company. For more information see our website. The IM is available on request.
Footfalls & Heartbeats
Footfalls & Heartbeats is a New Zealand start up that has developed a proprietary process for manufacturing smart textiles that improve healthcare and sports performance. See our website for a description of that offer and links to the business. The Investors in this offer include many with relevant industry experience – like Dr Gary Pace (San Diego), a Director of Resmed (NYSE: RMD) who has also become a director; Dig Howitt head of manufacturing at Cochlear (ASX:COH); Jeremy Collins, Footfalls’ current Investor Director who sold his electronic lighting technology company to Phillips; Sir Eion Edgar; and a private investor in Australia with a software and textiles background. There is now only $200,000 available from the aggregate $2,000,000 offered. The IM is available on request.
Living Green
This offer, jointly promoted by Pacific Channel and TBK Capital, closed fully subscribed last year. See our website for a description of that offer. Since then results to date have resulted in the business looking to expand further and is raising $250,000 by way of convertible notes. These will pay 12% per annum and convert in 24 months at the current share price to about 10% of the company. The company now has significant Chinese investment and sales and is about to enter New Zealand supermarkets, so it's at an interesting growth stage. A new IM will be available soon.
Exploron - Social Network Aggregator
Allele is a New Zealand based start up developing the Exploron “app” that eliminates the every day hassle of checking in, monitoring and interacting with multiple social networks. It’s aimed at “Socialites” - people heavily active across multiple networks like Facebook and Twitter. Exploron understands what information across networks is relevant to the user, picking out the best bits that actually matter to them and presenting it in an intuitive visual format. It allows advertisers, brands and local businesses to reach the people that matter. The company is raising just over $100,000 for the seed round to build the proof of concept for trial in the Australasian market and will be raising another $350,000 to $400,000 to launch the full-featured app globally. An IM will be available soon – let me know if you’d like a copy.
CallerAds – Mobile Phone Advertising
CallerAds is a New Zealand based start-up technology company with a focus on mobile phone advertising. For a summary of the offer see our website. It provides highly targeted access via a patented process to 18 to 25 year old mobile users who opt-in to the service for advertisers. This allows CallerAds to deliver marketing messages in any form on all mobile platforms - including mobile phones, tablets, computers, gaming machines and smart TV’s. The IM is available now on signing an NDA. Reply to this email or call me if you’d like a copy.
Freeflow Pipes – Revised Offer
Freeflow Pipes Ltd presented at an Investor Showcase Luncheon in Auckland in April and will be presenting again in Sydney next month. The feedback from interested parties shows conviction the business will revolutionise the industry here and in Australia, but they have a preference for share ownership from day one rather than the current offer of convertible notes. Accordingly the directors of Freeflow Pipes are now offering 26% of the company by the issue of new shares raising the $800,000 required to expand the major home builder business here and launch it in Australia. All preference shares will be converted to ordinary shares beforehand. See our website for a summary of the revised offer. A new IM will be available soon and sent to all who requested one for the original offer. Reply to this email or call me if you’d like a copy.
Happy to hear from you
I’m always happy to hear from you if you’d like to comment on the matters raised in Capital Comment – or of course it you’re looking for debt or equity for business or property or would like to invest in either. The best way to keep in contact is to phone me or simply by replying to this email.
Cheers
JP
John Paine
TBK Capital Limited
Level 15, BDO Building
120 Albert Street
Auckland 1010, New Zealand
Phone +64 9 307 3257
Fax +64 9 309 4519
Mobile +64 21 902 901
Email john.paine@tbkcapital.co.nz
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